A more public look: ViewRay plans to hit Nasdaq

ViewRay Inc. of Oakwood Village, which makes an MRI-guided radiation therapy system called MRIdian that images and treats cancer patients simultaneously, has raised well more than $100 million from private investors.

Now it's looking for more — this time from the public market. The company said in documents filed Feb. 13 with the U.S. Securities and Exchange Commission that it has applied to list its common stock on the Nasdaq Global Market under the symbol “VRAY.” In a March 25 amendment to the initial filing, ViewRay said it plans to sell 4 million shares of common stock. (Underwriters of the offering also have the option to purchase 600,000 shares.) ViewRay said in the filing that it expects the initial public offering price will be between $12 and $14 per share, and that the IPO will raise a total of about $64.4 million. (You can read the amended IPO filing at tinyurl.com/oydmjx7.) The company estimates that net proceeds from the offering will be about $45 million, or about $52.2 million if the underwriters exercise their option to purchase additional shares in full, at an assumed IPO price of $13 per share, which is the midpoint of the expected price range. “We currently intend to use the net proceeds we receive from this offering to support the ongoing commercialization of MRIdian, including sales and marketing activities, manufacturing and supply chain management, installation, customer support and product quality, for research and development related to continued product development activities and for general corporate purposes, including working capital,” ViewRay said in the amended IPO filing. Michael Saracen, senior director of marketing at ViewRay, said in an email that the company could not comment on the IPO, since the company is in the “quiet period” set by SEC regulations. The IPO is just the latest growth step for the company, which received U.S. Food and Drug Administration marketing clearance for MRIdian in May 2012 and now has patients receiving treatment on the system at three of the country's top cancer centers: Washington University in St. Louis, the University of California, Los Angeles and the University of Wisconsin. As recently as February, ViewRay raised $15 million from investors, following a $16 million raise in January, according to documents filed with the SEC. (The document for the $15 million February fundraise is at tinyurl.com/o98cxgh.) Before this year, it had raised more than $100 million from investors. Aram Nerpouni, president and CEO of BioEnterprise Inc., the Cleveland-based business formation, recruitment, and acceleration initiative which assisted ViewRay after the company moved here from Florida in 2008, said it's “incredibly exciting” to see a Northeast Ohio company going public, which of late has been a rare occurrence as the IPO market generally has slowed. But biomedical and biotech companies have been a recent exception to that trend. The Boston Globe reported, for instance, that a record 71 biotech companies went public in 2014, “raising more than $5.2 billion in a financing and investment boom period during which drug, medical device and diagnostic companies outperformed broader markets that were also hot.”That activity has been disproportionately concentrated on drug development and pharmaceutical companies, Nerpouni noted, where IPOs have been “rather frothy.” He said IPOs for medical device companies have been “relatively light,” and that acquisitions, rather than public offerings, “have been the main proxy” for cashing out.

This could take a while

As a result of receiving the FDA clearance and placing MRIdian in three big cancer centers, ViewRay has been generating revenue.

But so far, that revenue is modest. ViewRay said it generated revenue of $3.2 million in 2013 and $6.4 million in 2014. Those figures could be about to rise sharply, though, since as of Feb. 28, ViewRay said in the amended IPO filing that it had 11 signed sales contracts for MRIdian systems in backlog with a total value of $60.4 million, “of which we expect to recognize approximately 35% to 50% as revenue in 2015 representing four to six MRIdian systems.” Still, the company's losses to date have been substantial. ViewRay reported in the filing that it had net losses of $27.2 million in 2013 and $33.8 million in 2014. Such losses are not particularly unusual for a company going public these days. Jay Ritter, a business professor at the University of Florida who tracks IPO data, found that more than 70% of companies that had an IPO last year had not yet posted a profit. (Ritter posts extensive data about IPOs on his website; you can find it at tinyurl.com/pdqxtn2) Investors in such companies, essentially, are taking a chance on a big future return if a product turns into a major hit. ViewRay cautioned in its IPO filing that, “We expect our net losses to continue as a result of ongoing expansion of our commercial operations, including increased manufacturing, sales and marketing costs.” These net losses “have had, and will continue to have, a negative impact on our working capital, total assets and stockholders' equity,” the company stated. “Because of the numerous risks and uncertainties associated with our commercialization efforts, we are unable to predict when we will become profitable, and we may never become profitable.”

On target

ViewRay in the IPO filing bills the MRIdian system as “the first and only MRI-guided radiation therapy system that images and treats cancer patients simultaneously.” MRIdian uses magnetic resonance imaging and Cobalt-60 radiation therapy to “locate, target and track the position and shape of soft-tissue tumors while radiation is delivered,” according to the filing.

The MRIdian system allows doctors to take real-time MRI images to pinpoint the location of cancerous tumors and then shoot them with radiation. It's a delicate process that requires precision. Karen Spilizewski, vice president of business development at BioEnterprise, said patients with, say, lung or breast cancer are moving as they breath, and therefore the tumors are moving. MRIdian's design enables precise targeting of tumors without irradiating healthy tissue, she said. BioEnterprise's Nerpouni characterized ViewRay as “an incredibly innovative company.” He noted that in January, ViewRay entered into an exclusive distributor agreement with ITOCHU Corp. to sell ViewRay's MRI-guided radiation therapy system for the treatment of cancer in Japan. In a news release announcing that agreement, Chris A. Raanes, president and CEO of ViewRay, said, “Through our partnership with ITOCHU, we look forward to making the benefits of our ... technology widely available to Japanese physicians and patients over the next few years.”